Russian court makes foreign donations to NGOs tax free

The Russian Supreme Arbitration Court has freed non-governmental organizations from paying a tax on the donations they receive from foreign foundations. The tax officials wanted to levy a 24 percent profit tax on such donations.

­The court case started in 2009 after tax inspectors from the Russian internal republic of Tatarstan tried to levy a 700 000 rubles (about $25 000) profit tax on the Russian trans-regional human rights association Agora for two separate donations they had received from the US Endowment for Democracy and the TIDES foundation. Together with the fines, the sum owed reached some 1.2 million rubles. The tax inspectors insisted that the donations should be taxed, while the human rights activists said that taxation should only be applied to grants – sums donated to both non-profit organizations and ordinary for-profit enterprises.

Two previous court rulings had favored the tax inspectors, prior to the Supreme Arbitration Court’s decision to apply the principle of singularity as it corresponds with legal norms. Other Russian regions do not tax NGOs, for example, back in 2009, a court in the Urals city of Yekaterinburg ruled in favor of the “Planet of Hopes” NGO in a similar case. The court also recognized that the non-governmental organizations are by definition non-profit. The court decision will now be applied throughout the Russian Federation in the event that a court of arbitration receives a similar case in the future.

The head of the Agora foundation, Pavel Chikov, has said he was happy with the court ruling, and that a different decision could have meant the end of hundreds of Russian NGOs that receive about one billion rubles in donations annually. “If the taxmen seek several million dollars in back taxes from the Moscow Helsinki group, for example, it would simply go broke,” the Nezavisimaya Gazeta daily quoted Chikov as saying.